Naval Ravikant: Diagnose Where We Are Heading @SVC2M

Probably you are already familiar with Naval Ravikant, a co-founder of AngelList, which is trail-blazing and single largest platform for Angels and startups who want to raise seed funding.

Of course, it has grown so much to the point where there are more than 3,000 investors which consist not only of angels, but of VCs and M&A funds. He certainly deserves most of credits, when it comes to building up an incredibly efficient funding ecosystem and gifting start-ups with abundance of liquidity.

So, what’s my point? Today I came across his talk delivered in Malaysia and found it really nutritious, which at the same time made me wonder how this talk has only 118 views—as I write on—Youtube. Some of the points made are truly gems. I wouldn’t say the questions from the audience aren’t of good quality, but answers from him are definitely worth spending time for. I summarized the talk into 10 points for those who feel they don’t have enough time, although I strongly urge you to see for yourself. The points are listed here in no particular order.

Technology is stuff that doesn’t work well

A quote by Douglas Adams. If we stick with this definition of technology, lots of things will turn into opportunities; as he puts it, most of things doesn’t work well. And especially in Asia, still even more things don’t work. In other words, in Asia there are still lots of things that can be fixed; thus huge opportunities for entrepreneurs. During the talk, He reiterated several times that Asia is going to be the next jewel for its size and growth of the market. However, entrepreneurs in the region seem not to fully take advantage of the potential. My idea is that Asian entrepreneurs need some more exposure from Silicon Valley or top-notch entrepreneurs and really figure out how they move and think; rather than cloning business models from Silicon Valley.

Focus on one thing and do it really well

As far as getting a funding goes, there are 5 key areas for start-ups to take to their hearts; traction, team, product, social proof, and pitch. And probably you can say that this is arranged in the order of importance. As he puts it in his talk ”an Anatomy of a Fundable Start-up”, traction trumps everything. And essentially investors should turn to teams. What investors want to see is a sign of excellence. They will probably ask you directly or indirectly what the most impressive thing you’ve ever done in your life is. The success of start-ups builds on excellence, not wide range of mediocrity and if there’s at least one thing truly exceptional, there are usually higher chances to clinch other areas in high degrees.

Coding is a new leverage, a parallel to fire and stone axe

Leverage is what gives you control. We put coding above just about every invention of human history and parallel to fire and stone axe. The reason is that coding can be done by one man and no one argues whether it’s done by single individual or by a group of people.

Investors don’t invest in companies where they physically aren’t

This is quite a famous old adage in Silicon Valley. Investors are people after all; They trust whom they know and they can go to and check out on. As Naval reveals, there is still a huge obstacle for startups outside the US to get a funding. In AngelList, 90% funding deals are closed within the US, about half of them happen in Silicon Valley. Basically still money isn’t as much mobile as we want it to be. Start-ups in Malaysia, for example, are deprived of opportunities due to low liquidity in the funding market, whereas start-ups in Silicon Valley are relatively blessed with opportunities to get fundings. Of course this doesn’t mean it’s easy to raise a funding there; the place is cutthroat competitve, and power law rules.

Will coding become a new literacy?

He made an interesting argument which will surely spark off some controversy. Personally I would bet on his argument. Technology intelligence–more specifically understanding in coding–will come in handy at full scale for the next few generations, unless something else replaces it. Some wealthy families will pay a good sum to bring private tutor to teach coding for their children. Coding will become an integral part in standard curriculum of schools; students will cry over the bad grade on the subject called programming. Of course no one will really code, but we will learn it anyway just by the importance of it. Think about the mathematics and science. How many of us actually ended up being a scientists or mathematician.

Incubators are new graduate schools

How much do you have to pay for 2 years of being a graduate student at Stanford? probably somewhere around $200k. It takes 2 years of youth and handsome money. What do you get out of it? It depends on what goal you have in mind, but if you are after start-ups, you’d better choose incubators. a) you don’t get burdened with predictably low return. b) you still don’t have guarantee for a hire. c) opportunity cost is that you can’t do anything really creative and original. Y-combinator has now allegedly 2% acceptance rate for its applicants. The reason being that people learn best by doing.

Funding market develops backwards

Vibrant community of angels show up, when the funding market almost fully matures. It’s easy to imagine funding market should develop linearly through the development of start-ups; getting a seed funding from angels, raising round A from VCs, and so on. Angels are the last group to show up in funding market, as angel investing entails highest risks. Of course, the flipside is the super higher return in investment and as big success cases bubble up, angels start to enter the scene.